SL 8: Making Large Upfront Payments

Let's Take This One Step Further

Let's say you made 7 consecutive $5,000 lump sum payments each year at 12 months apart;

In other words, you made a lump sum payment for $5,000 beginning Year 1; another lump sum payment for $5,000 beginning Year 2; and the final lump sum payment of $5,000 beginning Year 3 and so forth 12 consecutive years.

How much interest would this save you?

$100,000 Mortgage 30 Year Term - 6% APR	Monthly Lump Sum Payments
	$0	Seven - $5,000
Total Payments	$215,838.19	$107,319.54
Total Interest Paid	$115,838.19	$41,785.34
Total Principal Paid	$100,000.00	$100,000.00
Total Interest Saved		$74,052.85
Mortgage Payoff Time	30 Years	14 Years

$200,000 Mortgage 30 Year Term - 6% APR	Monthly Lump Sum Payments
	$0	Seven - $5,000
Total Payments	$431,676.38	$349,775.27
Total Interest Paid	$231,676.38	$133,695.03
Total Principal Paid	$200,000.00	$200,000.00
Total Interest Saved		$97,981.35
Mortgage Payoff Time	30 Years	20.9 Years

The Magic is Paying Up-Front

The goal is to get more of your monthly payment paying off the principal. By making large lump sum payments up-front, you can reach your mid-point must quicker.

In our example above, we were able to meet the mid-point as follows:

$100,000 loan: 5.2 years (vs. 18.6 years with no lump-payments)
$200,000 loan: 9.3 years (vs. 18.6 years with no lump-payments)

mid-point is where your mortgage payment begins to pay more on principal than on interest

Download this spreadsheet to run your own numbers.

— FREE Download (MS Excel Worksheet)

You can enter lump-sum payments to analyze your payoff terms and interest savings